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Why car insurance premiums have gone up almost 50 per cent · The Morning Edition

• 0:01
  S1: Car insurance in Australia has gone up by nearly 50%
• 0:05
  S1: in the last six years. And as you might have noticed,
• 0:08
  S1: insurers haven't told customers why you pray.
• 0:11
  S2: Amen. It went up $745 in the last 12 months.
• 0:17
  S3: Oh geez.
• 0:19
  S4: I couldn't believe how much it'll cost me per month
• 0:23
  S4: to insure the car. They just pulled these numbers straight
• 0:26
  S4: out of their ass. They come from nothing. Call and
• 0:29
  S4: cancel and I guarantee you you will save hundreds.
• 0:31
  S1: It's only one of the reasons why our main financial
• 0:34
  S1: regulator has just put car insurers on notice. I'm Samantha
• 0:38
  S1: Salinger Morris, and you're listening to The Morning Edition from
• 0:41
  S1: The Age and Sydney Morning Herald today, national consumer affairs
• 0:45
  S1: reporter Elias Vincent on inside tips to get lower insurance
• 0:50
  S1: and why drivers overseas are on a better wicket. It's
• 0:54
  S1: August the 12th. Elias, welcome back to the podcast.
• 0:59
  S5: Thanks for having me.
• 1:01
  S1: Okay. You have to tell us how much are people
• 1:04
  S1: paying on average for their car insurance compared to six
• 1:07
  S1: years ago.
• 1:08
  S5: The takeaway figure is that they've jumped by about 50%,
• 1:12
  S5: which is kind of nuts. You know, a lot of
• 1:14
  S5: the time when car insurance premiums get talked about, we
• 1:18
  S5: get figures year by year and, you know, they kind
• 1:21
  S5: of drown or fade away against all these other price
• 1:24
  S5: rises we're seeing. But when you zoom out and look
• 1:27
  S5: at this 50% rise, it's it's well above what inflation's
• 1:31
  S5: been across the rest of the economy. Like this is
• 1:33
  S5: a serious jump.
• 1:35
  S1: Okay. And this this tracks with how I feel like
• 1:37
  S1: I'm getting hammering monthly. But just tell us like what
• 1:39
  S1: is the average price that people are paying?
• 1:41
  S5: This is a great question. There's so much variation, it's
• 1:44
  S5: almost impossible to know. Right? I'm sure if you've been
• 1:47
  S5: insuring a car, you will have had memories of it
• 1:49
  S5: maybe costing a couple hundred bucks for comprehensive insurance. And
• 1:53
  S5: I know for myself, I was stunned when I recently
• 1:55
  S5: got a bill to renew for almost $1,000. And I
• 1:59
  S5: was driving a tiny small hatchback. Yeah. Just to give
• 2:02
  S5: you a sense of how wildly different the prices are
• 2:05
  S5: that people are paying, the comparison platform finder analyzed 26
• 2:10
  S5: different comprehensive motor policies and found an $1,871 difference between
• 2:17
  S5: the cheapest and most expensive providers. And those were the
• 2:21
  S5: same policies. So like, there's a huge amount of variation
• 2:24
  S5: that Australians are facing when it comes time to insure
• 2:27
  S5: their cars.
• 2:28
  S1: Okay. And I guess second to that, you've just written
• 2:31
  S1: about a new report by the Australian Securities and Investments Commission.
• 2:35
  S1: This is Australia's main financial regulator, and it has been
• 2:38
  S1: very critical of insurers over this increase. So what has
• 2:42
  S1: the regulator said.
• 2:43
  S6: So the regulator.
• 2:44
  S5: Released this report this week. It's looking specifically at how
• 2:49
  S5: insurers are communicating with their customers. And the main takeaway
• 2:54
  S5: is they were pretty scathing of the fact that insurers
• 2:57
  S5: aren't really doing enough to explain to customers what is
• 3:01
  S5: driving their prices so much higher. In many cases, they're
• 3:05
  S5: giving really generalized examples, not going into the detail, and
• 3:11
  S5: in some cases, not even offering an explanation at all. Now,
• 3:15
  S5: ASIC says that puts customers in a really tricky position.
• 3:19
  S5: Without that knowledge, they're kind of in the dark about
• 3:22
  S5: whether they should be pushing back or whether they can
• 3:24
  S5: be shopping around for a better deal.
• 3:27
  S1: Okay. And I really wanted to ask you about this
• 3:28
  S1: because you've written tell me if I've got this straight.
• 3:31
  S1: Did the ASIC essentially find out that time poor customers
• 3:34
  S1: are effectively taxed for their loyalty to an insurer? Like
• 3:37
  S1: if they don't push back, they just keep paying higher premiums.
• 3:40
  S1: But those that push back actually do find that the
• 3:44
  S1: insurer sort of stops raising the price.
• 3:47
  S6: Yeah, this statistic.
• 3:48
  S5: Really jumped out at me. Um, but basically they surveyed
• 3:52
  S5: I think it was 2000 Australians with motor insurance and 31%
• 3:58
  S5: of people basically a third. All they had to do
• 4:01
  S5: was just call up their insurer. They're already with say
• 4:05
  S5: they weren't happy with the price and they were readily
• 4:07
  S5: offered a discount. Obviously, there were many other ways people
• 4:11
  S5: could save by shopping around, but I think what the
• 4:14
  S5: asic's getting at here is, there does seem to be
• 4:18
  S5: a bit of give in the system that when people
• 4:20
  S5: are getting these renewal notices or quotes, they're they're not
• 4:25
  S5: the best price that customers can be paying. I think
• 4:28
  S5: it really raises questions about some of the things we've
• 4:31
  S5: been hearing from the industry. I think it's quite acknowledged
• 4:35
  S5: that there has been, you know, a rise in the
• 4:39
  S5: cost of providing insurance to Australians. But but given just
• 4:43
  S5: how easy it does seem to be for some of
• 4:45
  S5: these insurers to be dropping their prices very quickly, it
• 4:50
  S5: raises questions about whether that whether that rise in premiums
• 4:53
  S5: we were talking about that 50% over six years really
• 4:56
  S5: represents the true cost of what these insurers have been facing.
• 5:00
  S1: Okay. Well, so to that, I've got a two part
• 5:02
  S1: question for you, which is that because this would all suggest,
• 5:04
  S1: at least to me as a layperson, that insurance companies
• 5:07
  S1: do not have to increase premiums. So I guess what
• 5:10
  S1: do you say about that? And also what are insurers
• 5:13
  S1: saying about why their premiums have increased?
• 5:17
  S5: Yeah. Look, I don't think it's in dispute that just
• 5:20
  S5: like across the entire economy, prices for a lot of
• 5:23
  S5: things have been going up. Uh, and so I went
• 5:27
  S5: to the Insurance Council of Australia, um, as part of
• 5:30
  S5: writing this story. And they said that, look, according to
• 5:33
  S5: their data, motor claim costs were up 47% since 2020.
• 5:39
  S5: So that's quite a lot. Not quite as much as
• 5:42
  S5: we've seen premiums rise. But I think what a lot
• 5:47
  S5: of people agree on is that the type of cars
• 5:50
  S5: that are on Australian roads that people are insuring have
• 5:54
  S5: become much more expensive to insure. The two big factors
• 5:59
  S5: in that space are probably the fact that Australians now
• 6:01
  S5: drive SUVs as the main car. I think ten years ago,
• 6:06
  S5: about 37% of new car sales were SUVs. Sedans were
• 6:10
  S5: still the most popular vehicle in 2026. Last month, SUVs
• 6:16
  S5: accounted for more than 65% of new car sales. So
• 6:20
  S5: Australians have really kind of fallen in love with these
• 6:22
  S5: bigger vehicles. That's just more metal, but also more componentry. Increasingly,
• 6:27
  S5: our cars are more teched up. We've got, you know,
• 6:30
  S5: inbuilt touch screen systems, other sensors. All of those things
• 6:35
  S5: not only make for a higher cost price for a vehicle,
• 6:38
  S5: but so much more that can go wrong. And in
• 6:40
  S5: the event of an accident, so much more that needs
• 6:43
  S5: to be repaired. The other big thing driving this is
• 6:50
  S5: electric vehicles. Electric vehicles, as most people will know, have
• 6:56
  S5: been much more expensive to buy upfront, and they present
• 6:59
  S5: a whole range of challenges to insurers. When someone gets
• 7:03
  S5: in a fender bender and needs them repaired. You know,
• 7:06
  S5: an example of this is traditional mechanics aren't equipped to
• 7:09
  S5: do things like de-energize, a battery, which is required when
• 7:13
  S5: you're working on an electric vehicle. There's a whole range
• 7:16
  S5: of those electric specific skills that Australia's workforce of mechanics
• 7:21
  S5: need to be skilled up in. And with that shortage
• 7:25
  S5: of skilled mechanics, it's just added to what has become
• 7:27
  S5: an incredibly costly line of vehicles to repair. That's happened
• 7:32
  S5: as Australians have been buying so many more electric vehicles
• 7:35
  S5: even before. You know, the kind of recent spike related
• 7:39
  S5: to the Strait of Hormuz fuel crisis, electric vehicles had
• 7:43
  S5: become increasingly increasingly sought after for their ability to save
• 7:48
  S5: money in the long term by climate conscious drivers. And
• 7:52
  S5: so insurers are looking at those two trends, and they're
• 7:55
  S5: saying there's a lot more risk on our roads if
• 7:58
  S5: these vehicles get into accidents. It's going to cost us
• 8:01
  S5: a lot more to repair them.
• 8:05
  S1: After the break.
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  S5: There's evidence that insurers are able to basically judge what
• 8:11
  S5: our behavioral tells might be what our likelihood is to,
• 8:15
  S5: to shop around, what our likelihood is to just accept
• 8:19
  S5: whatever their new quote is.
• 8:26
  S1: And you mentioned the Strait of Hormuz there. Which brings
• 8:28
  S1: me to my next point. Can you talk to us
• 8:30
  S1: a little bit about how the global market and all
• 8:33
  S1: the volatility that's happening around the world could be playing
• 8:35
  S1: into this as well?
• 8:36
  S5: Yes, I think it's very easy in Australia to think
• 8:39
  S5: we're isolated and we exist in a bubble here. but
• 8:43
  S5: our insurance markets are very much shaped by these global factors.
• 8:46
  S5: The other big thing here is the huge uptick in
• 8:51
  S5: natural disasters and weather related events that have been a
• 8:56
  S5: nightmare for insurers as a result of kind of wanting
• 8:59
  S5: to hedge their bets on that risk or not risk
• 9:02
  S5: losing hundreds of millions of dollars in the event of
• 9:05
  S5: a particularly bad storm. Say there's a whole industry kind
• 9:09
  S5: of called reinsurance that exists, which is basically where insurers
• 9:13
  S5: go to get insurance to, to kind of reduce their
• 9:16
  S5: own risk. And that's for these really kind of big
• 9:19
  S5: scale catastrophes. But, but what we've seen with all these
• 9:22
  S5: changing weather events is that the cost of providing that
• 9:26
  S5: reinsurance is growing. And, and as a result, our insurers,
• 9:32
  S5: who we as Australians are dealing with to reinsure our cars,
• 9:36
  S5: they're facing higher costs when they have to cover themselves.
• 9:39
  S5: And so even though it might seem like. How does
• 9:43
  S5: a storm particularly bad one in, say, America, affect my
• 9:47
  S5: car insurance in Melbourne, the reality is insurers have to
• 9:52
  S5: spread these costs and these risks across all of their
• 9:55
  S5: offerings and all of their businesses. So yeah, in a
• 9:58
  S5: in a way, those factors war in the Middle East
• 10:00
  S5: and the kind of worsening climate events we're seeing around
• 10:04
  S5: the world, they're all adding to the cost of your
• 10:07
  S5: premium for your car, too.
• 10:10
  S1: Okay, so you've waded through all this information on both sides,
• 10:13
  S1: on the consumer side, on the insurers side. Now, I guess,
• 10:17
  S1: help us cut through this because ASIC's says insurers are overcharging.
• 10:21
  S1: Insurers say, oh, wait a minute. There's all these factors
• 10:24
  S1: that are forcing us to increase our premiums. So which
• 10:27
  S1: version is the closest to the truth here, Elias?
• 10:30
  S6: Well, I think.
• 10:30
  S5: With all questions like this, it's probably somewhere in the middle.
• 10:35
  S5: As as we've gone through, there's just been an undeniable
• 10:38
  S5: rise in the cost of insuring our cars. Um, but,
• 10:43
  S5: but I think it's really telling, as the ASIC said,
• 10:46
  S5: just how willing and ready insurers are to discount at
• 10:50
  S5: the fear of losing you. And I think this talks
• 10:53
  S5: to a greater point about just how advanced some of
• 10:57
  S5: the systems are, the algorithms that deliver our quotes to
• 11:00
  S5: us and price insurance for us. You know, we think
• 11:04
  S5: what makes up our quote should be about, you know,
• 11:06
  S5: if you're going online to get one, you might put
• 11:09
  S5: in risk factors like your age, where you live, how
• 11:12
  S5: many accidents you've had. That stuff, I think has been
• 11:15
  S5: acknowledged as, as pretty fairly influencing how much your insurance
• 11:19
  S5: should cost. But, but what we may not realize is
• 11:22
  S5: that insurers are able to, to figure out so much
• 11:25
  S5: more about us that we might not be giving in
• 11:27
  S5: those questionnaires. And there's evidence that insurers are able to
• 11:32
  S5: basically judge what our behavioral tells might be what our
• 11:38
  S5: likelihood is to to shop around, what our likelihood is
• 11:43
  S5: to just accept whatever their new quote is. You know,
• 11:46
  S5: that can come from a whole range of insights, like
• 11:49
  S5: where we are in life, whether we have a family, uh,
• 11:53
  S5: also our purchasing behavior in the past. So I think
• 11:56
  S5: given that we know this ecosystem exists and there's, there's
• 12:00
  S5: countless examples of evidence that Australian insurers are using this
• 12:03
  S5: kind of analysis to give us a quote. I think
• 12:06
  S5: it's pretty fair for Australians to think, hold on a sec.
• 12:10
  S5: Are these prices really the best I could be paying?
• 12:13
  S1: Yeah, I mean, I think I think a lot of
• 12:15
  S1: us are asking that. And I wanted to ask you,
• 12:17
  S1: I guess, about our overseas counterparts because vehicle drivers in
• 12:20
  S1: the US and the UK, they've also been experiencing car
• 12:23
  S1: insurance price increases. Right. But at face value at least,
• 12:27
  S1: there seems to have been more action from their lawmakers
• 12:30
  S1: as opposed to ours to fight against this. So can
• 12:33
  S1: you just tell us a little bit about that.
• 12:35
  S5: Certainly, yeah. All of those factors making it more expensive
• 12:39
  S5: exist overseas. The key thing, I guess, is what governments
• 12:42
  S5: have done in America. Some of those tactics I was
• 12:46
  S5: talking about where insurers might offer a different price based
• 12:50
  S5: on your behavior, or what they can infer about you
• 12:52
  S5: and your likelihood to renew or just accept a new price.
• 12:56
  S5: Certain states have actually outlawed the use of those practices.
• 13:01
  S5: And when we look at the UK, um, I think
• 13:03
  S5: this is a key one, this idea of a loyalty tax, right?
• 13:07
  S5: The fact that an insurer might be outwardly saying, uh,
• 13:10
  S5: you know, we, we treat our customers, we treat our
• 13:13
  S5: loyal customers and we reward them for their loyalty. Um,
• 13:18
  S5: we've seen it get to a point there where the
• 13:20
  S5: government has stepped in and, and essentially, you're not allowed
• 13:24
  S5: to offer someone a different price on the same policy
• 13:27
  S5: just because, say, it was an offer designed to incentivize
• 13:32
  S5: people to come on over and join up. You're not
• 13:34
  S5: allowed to differentiate in that way. But when we look
• 13:37
  S5: at the Australian market, there's very few kind of rules
• 13:41
  S5: and and forces here stopping motor insurers from doing these
• 13:46
  S5: types of things. And it stands in stark contrast to
• 13:49
  S5: some of the other insurance markets in Australia that are
• 13:52
  S5: pretty heavily regulated. You know, for instance, the motor insurance
• 13:57
  S5: industry here, there's no cap say on on how large
• 14:01
  S5: a premium rise has to be year on year. Insurers
• 14:04
  S5: are also able to charge you more if you choose
• 14:07
  S5: to pay by month instead of by year. Even other
• 14:11
  S5: parts of the insurance landscape to do with cars. You know,
• 14:15
  S5: every state has something called compulsory third party insurance. That's
• 14:19
  S5: basically not to do with damage to a car, but
• 14:22
  S5: injury or death in the event of an accident. That's
• 14:26
  S5: heavily regulated state by state. But all of those guardrails
• 14:30
  S5: and rules and processes that doesn't apply to motor insurers
• 14:34
  S5: for comprehensive policies.
• 14:36
  S1: Interesting. And I just wanted to go back just a
• 14:37
  S1: moment to the practice that you spoke about that's been
• 14:39
  S1: banned in the US. I mean, what sort of methods
• 14:42
  S1: are they using to determine customer behavior? Like, are they
• 14:45
  S1: using AI to troll people's lives?
• 14:48
  S5: In a nutshell, it's really tough to know the extent
• 14:50
  S5: to which this kind of behavioral analysis of us is
• 14:53
  S5: going on. Insurers aren't super forthcoming with it, but there's
• 14:58
  S5: some really interesting chats I've had with people in the
• 15:00
  S5: industry that suggest it's much deeper than you think. So
• 15:03
  S5: I think we talked about that example before about if
• 15:05
  S5: you're a busy family, you're probably likely to just accept
• 15:09
  S5: a bill. You know, you've got them coming in at
• 15:11
  S5: you from every direction. You just do it. You don't
• 15:15
  S5: think you have the time to shop around. Some of
• 15:17
  S5: that data from ASIC really backed that up. Apparently, when
• 15:20
  S5: faced with an insurance premium rise, 67% of the people
• 15:24
  S5: they surveyed just just cop. It just stayed. And given
• 15:27
  S5: we don't have those laws that exist overseas. Kind of
• 15:30
  S5: banning this deep level of customized quoting. It's really tricky
• 15:36
  S5: to know just how far insurers are taking it. You know,
• 15:39
  S5: I was speaking to an industry source who said purchasing
• 15:44
  S5: habits of customers could be something that companies can get
• 15:48
  S5: a hold of as data is sold around the economy
• 15:52
  S5: and something as as novel as their their likeliness to
• 15:57
  S5: buy chickpeas from the supermarket. That could tell an insurer
• 16:00
  S5: that this is someone who makes their own hummus, which
• 16:04
  S5: they would associate with someone having plenty of free time
• 16:07
  S5: on their hands. That might mean they're much more likely
• 16:10
  S5: to shop around or call up and push back on
• 16:14
  S5: a renewal increase. So look, it's really kind of a
• 16:17
  S5: Wild west new frontier out there. But bringing this all
• 16:20
  S5: back to to the findings, you know, this 50% increase
• 16:24
  S5: what you can do to reduce your motor insurance bill.
• 16:28
  S5: There are certainly things like buy a smaller car, or
• 16:32
  S5: if you need a car with a bit more oomph,
• 16:35
  S5: something that's a bit more suitable to where you live.
• 16:39
  S5: Electric vehicles obviously save you money on running in the
• 16:42
  S5: long term, so there's probably not a super strong argument
• 16:45
  S5: to avoid buying them. But I think if we bring
• 16:48
  S5: it back to this advice from ASIC, there's really strong
• 16:52
  S5: evidence that just pick up the phone, give them a call.
• 16:55
  S5: You stand a really good chance of getting a discount.
• 16:58
  S1: That's really it. Aside from perhaps buying your own chicken.
• 17:01
  S6: Yes. Yeah, exactly.
• 17:03
  S5: You know, drop any hint you can to any data
• 17:06
  S5: analysis out there that you've got time on your hands
• 17:09
  S5: and that you like to kick up a stink, that'll
• 17:11
  S5: probably help you, too.
• 17:12
  S1: Well, thank you so much, Elias, for your time.
• 17:15
  S5: Thanks for having me.
• 17:17
  S1: In other news today, property prices could slump by almost 15%
• 17:22
  S1: over this year and next, economists have warned, citing interest rates,
• 17:26
  S1: low levels of affordability and the federal government's property tax changes.
• 17:31
  S1: Commercial fishing is removing at least 2.2 million kilograms of
• 17:35
  S1: fish and other sea creatures from Australian marine parks, using
• 17:39
  S1: controversial practices such as bottom trawling and longlining. And after
• 17:44
  S1: scanning the brains of dogs, scientists have found that they
• 17:47
  S1: are excellent at reading and responding to human emotion even
• 17:52
  S1: better than our closest evolutionary relative, the chimpanzee. You can
• 17:56
  S1: read more at the age.com.au or smh.com.au. Today's episode was
• 18:03
  S1: produced by Tammy Mills, and our podcasts are overseen by
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